Judge tosses Chicago pension deal

SPRINGFIELD — Chicago Mayor Rahm Emanuel’s effort to shore up two of Chicago’s ailing pension funds was voided Friday by a Cook County Circuit Judge.

Judge Rita Novak issued her decision in a lawsuit brought by workers, retirees and unions who argued the plan amounted to a reduction in benefits and violated the state constitution’s pension protection clause.

The city last year negotiated a deal with 27 of 31 unions to revamp the rules for its pension funds for laborers and other city workers, excluding police officers and firefighters, who have their own pension funds.

In return for concessions such as greater contributions from employees and reduced cost of living allowances for retirees, the city agreed to bolster its own contributions to the funds.

The two pension systems are underfunded by more than $9 billion and are projected to fail in roughly a dozen years if nothing is done to address the shortfalls.

Novak rejected the city’s contention that its actions actually strengthened the pension benefit by ensuring the funds’ solvency, as well as the argument that the changes were acceptable because they’d been bargained with most of the unions involved.

The judge wrote the strengthened-benefit argument failed on many levels, including running afoul of state constitution, which defines membership in a public pension plan as “an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

She also cited several faults in the argument that the deal had been bargained and was therefore binding,

“There is no evidence that, in reaching an agreement with the city, the union officials followed union rules and bylaws in such a way as to bind their members as true agents,” Novak wrote. “Nor is there evidence that the membership voted on the agreement.”

And, the judge wrote, “there is no showing that the unions could have acted as agents of retired members while at the same time acting as representatives of active employees.”

The city said it will appeal.

“While we are disappointed by the trial court’s ruling, we have always recognized that this matter will ultimately be resolved by the Illinois Supreme Court. We now look forward to having our arguments heard there,” said the city’s chief attorney, Robert Patton.

Patton said the measure in question “not only rescues the municipal and laborer pension funds from certain insolvency, but ensures that, overtime, they will be fully funded and the 61,000
affected City workers and retirees will receive the pensions they were promised.”

Moody’s, which had already downgraded Chicago’s bund to “junk” status, said it considers Friday’s decision as “credit neutral” because it already expected the case would end up before the state high court.

The Illinois Supreme Court in May ruled unconstitutional a similar state law intended to bolster the state’s pension systems, which are an estimated $110 billion short of adequate funding. It held the 1970 constitution’s pension protection clause clearly and unambiguously applied.